Manufacturing output hits three-year high: Best piece of economic news this year, says Clarke

MANUFACTURERS stepped up production sharply in April, to its highest level in more than three years, official figures showed yesterday. With an eye to today's European elections, Kenneth Clarke hailed it as the best piece of economic news so far this year.

The 1.1 per cent rise in factory output coincided with the Chancellor's monthly meeting with the Governor of the Bank of England to discuss interest rates, at which City economists said they were almost certain to have agreed that rates should remain unchanged.

The Central Statistical Office said that factory output was rising at a trend rate of 4 per cent a year, but was still 3.7 per cent below its level before the recession. The jump last month was dominated by higher output of rubber, plastics, electrical engineering, coke, mineral oils and nuclear fuels.

The figures, together with an assurance from John Major that the Government would not impose controls on dividend payments, helped to push the FT-SE index of 100 leading London shares 33.4 points higher to 3,038.2.

But City economists warned that it was too early to tell from these figures whether April's tax increases would slow the pace of recovery. This was likely to persuade the Chancellor and the Governor to keep base rates at 5.25 per cent for some months.

Ian Shepherdson of HSBC Greenwell said the figures were in line with recent surveys from the Confederation of British Industry and the latest Purchasing Managers' Index. He added that rising output of capital goods 'suggests that the long-awaited industrial recovery is well under way'.

Separate figures from the National House-Building Council showed more houses had been started in the first five months of 1994 than in any equivalent period for five years.

The National Institute of Economic and Social Research argued in a report yesterday that productivity - output per worker - in manufacturing grew more quickly in Germany than in Britain over the past 30 years, although in half the industries Britain had done better. German factory workers had about 30 per cent more capital equipment at their disposal in 1989 and were twice as likely to have skills. Germany also spent more on research.